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I work for the pharma industry for 20 years and for the last 10 years I have worked as a sell-side analyst and investment banker in healthcare
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  • Time To Revalue IntelGenx- 2 More Products Being Reviewed By The FDA For Approval

    IGXT is a drug delivery company developing improved formulations of approved drugs for North America. IGXT has already succeeded to get one FDA approved drug using its proprietary technology: Late in 2012, Forfivo XL™ (the only single tablet high dose alternative to lower dose multiple tablet Wellbutrin XL® indicated for depression), was launched by Edgemont Pharma in the US. However the success of this small-cap based in Montreal (Canada) stands much deeper given its strong pipeline of products. Let's focus for now on just two new drugs that are now late stage and could be launched within the next 12-18 months.

    IntelGenx has unique skills in developing improved drugs and has been very successful given the amount of capital invested. Investors should not forget that the company has raised less than $15m since its inception in 2003, has one drug approved and two drugs in the waiting room. Investors should also know the odds favors IntelGenx to receive approval for both drugs given reformulated drugs have an overall approval rate >90% compared to new chemical entities or NCEs below 30%.

    First, the announcement this week for a US filing for a generic of Suboxone film (buprenorphine and naloxone for the treatment of opioid addiction.) for a relatively large market should be a wake-up call for investors. The product is likely to be first generic to market in the fast growing market $1.4bn (tablets and film version almost divided equally). It is difficult to predict what Reckitt Benckiser Pharmaceuticals, the brand manufacturer, will do given its sizeable contribution to profits for the company. Currently patients must be medicated 3x/day; therefore an annual treatment between $4,300- $7,700 depending on the dose. In recent years, the market has shifted from tablets to film formulation to reduce side effects and be cheaper, which is good news for IGXT. Therefore the potential for this product could be huge given that film revenues have increased by 50% versus the prior year. Usually first generic companies capture 60-70% of revenues for the exclusive period (normally six months). Contrary to tablet formulation, where there are many generic companies (>300), makers of film products are very few, probably less than ten in the world. High barriers to entry in formulating this product provide a huge potential upside for IGXT. Therefore we would expect IGXT could enjoy a leadership position beyond six months. Assuming a conservative $1.5bn market at the time of market launch, a 25% price discount and capturing a 50% market, this would means revenues in excess of $500m for its commercial partner. With IGXT being the manufacturer and collecting royalties, this drug itself could add a minimum of $2.00/share in EBITDA. However given the patents on this drug are still valid until 2022, I am not sure when IGXT could launch this drug, but I am sure management has spent time to figure a strategy to reach the marketplace as soon as feasible.

    The other important piece of news (June 18) involved the filing for regulatory approval of a novel anti-migraine drug developed by IGXT. I find this product could be an extremely appealing drug in this market because it offers something really different versus the competition. Even though the US migraine market is close to $2.5bn (all tablet formulations), many patients do not respond to many drugs, are often required to try different treatments and for many are left without any adequate treatments. The advantage of IntelGenx' Anti-Migraine VersaFilm is that it acts faster than probably most drugs and it is also easier to swallow. Commercially this would be the first oral film product for IntelGenx. There are very few oral film drugs on the market; therefore its success will be closely monitored. Assuming a $600m market at the time of market launch, a 25% price discount and capturing a 25% market, this would means revenues in excess of $100m for its commercial partner. With IGXT being the manufacturer and collecting royalties, this drug itself could add $0.40-0.45/share in EBITDA in 2015.

    These drugs are not $1bn potential but they can certainly generate significant revenues with a smaller investment and much lower risks than a typical cancer drug.

    Over the next 2 years, we should expect more drugs that could be launched or in the queue for regulatory approval with the FDA. I believe very few companies have accomplished this feat. We see too many catalysts to ignore the story. Given the company has already delivered on many fronts, drug delivery companies such as IGXT should not be ignored. This is much easier to swallow.

    This article is intended for informational and entertainment uses only and should not be construed as professional investment advice. The aforesaid is solely my opinion based on my personal due diligence. As with all stocks there is the risk of suffering financial losses. Do your own due diligence and consult with a professional financial advisor before investing in any stock including IGXT. I do not own the stock and does not intend to buy for the next 30 days.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jul 25 1:54 PM | Link | Comment!
  • Intel About IntelGenx

    It has been a while, but IntelGenx has finally decided to add an experienced senior executive with significant experience in drug formulation and business development. Dr. Rajiv Khosla has been appointed COO and CSO for the company and will become the new CEO at the beginning of 2014. Dr. Khosla will continue the work that he has been doing since being appointed to the management team as a consultant at the beginning of 2013.

    Looking back at his track record, I think Dr. Khosla is well-equipped for the upcoming commercial phase and should be more aggressive in licensing/partnering activities. Dr. Khosla has over 30 years of experience for five different specialty pharmaceutical companies, including a five year stint at Biovail where he was involved in more than 75 deals. I believe his experience will be valuable in deal making which is where IntelGenx need a little more muscle given the number of new projects maturing and in need of commercial partners.

    With their first FDA approved product, Forfivo XL™, an anti-depressant, launched late in 2012, I am becoming more optimistic about the company becoming profitable in the coming quarters. With another 10 drugs in development and a high probability of regulatory approval, I expect the majority of these drugs to be on the market by 2016. I expect the major risk is not about clinical development and approvability but rather on the commercial timing. Given that all of these drugs are second or third generation drugs, the commercial viability and success depends on the market timing and its reimbursement. If you saw the movie "A Good Year (2006)", Russell Crowe, as a young kid, was asked by his uncle what is the most important thing in life and the uncle said "TIMING". With my short thirty years of experience in the sector both as an analyst and in business development, I can vouch for that also.


    For healthcare companies, the analysis is usually quite complex because many of them have little or no revenues. For emerging technology companies like IntelGenx, the valuation is based on the drug assets in development and the people. The people have been successful at developing 2 drugs so far and another 10 using three different formulations which offer equivalent or better safety profiles for patients and, in some cases, are cheaper than the competition. If you assume an 80% success rate for the drugs currently being developed and an expected average of $50-$100m in end-user sales, with 20% royalties for IGXT, this would mean an EPS of $2.50-$5.00; excluding taxes. Not bad for a company with around 10 people and no debt. Another nice feature for IntelGenx has been is low burn rate which has been below most companies, especially those located in the US, built around ex-Pharma people and salaries. The company has plenty of cash, no lawsuits, and multiple patents to cover their work.

    Maybe the approach is too simplistic; however let's look at the most promising drug in the pipeline which is the anti-migraine drug. This is a $2bn US market with current treatments which I see as basically similar. Then you have IntelGenx with a novel oral strip formulation of the very popular Maxalt (marketed by Merck and now off patent) which sold more than $600m last year. What people need to focus is that when a new formulation comes in the market; it may also expand and captures market share from pretty similar drugs if it works. Patients who have migraine issues need faster onset of action rather than better pricing and doctors are looking for drugs that are safe, fast and efficacious. People don't die from migraine but if you ever had it, you don't care how much it costs, as long as it works. I believe this anti-migraine product could be a $200-300m product at peak revenues and the timing is perfect given that I don't expect any new drugs to hit the market in the next 2-3 years. This is a 2014 event for IntelGenx and it could be important for the company history.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 24 10:45 AM | Link | 1 Comment
  • IntelGenx - Moving To The Next Stage

    The Event- Forfivo XL is now officially launched in the US

    Forfivo XL is the first high-dose 450mg bupropion with a controlled release delivery formulation (once-a-day). The event is important for IntelGenx because it is first major product launch in the US market. I don't expect any revenues outside the US.

    Forfivo XL is certainly not a generic and therefore many people will be happy to know that. I also believe the recent decision by the FDA to pull the Teva/ Impax generic Wellbutrin XL 300mg from the market for non-bioequivalence could be a positive to Forfivo XL. I expect doctors to be more cautious in prescribing generics because they may not provide the expected benefits for the patients. There are certain drugs that people don't want to play with and they relate to CNS drugs. In addition the FDA is being more aggressive on closing down internet pharmacies because they are selling a number of non-equivalent dosages. Therefore bringing a novel drug such as Forfivo XL 450mg will be appealing for people who will expect quality. The Forfivo XL single dose bioequivalence study completed some time ago proved to be bio-equivalent to 3 Wellbutrin XL150mg tablets once daily. This will be important for physicians who don't want to offer high doses to patients and expect compliance. In many cases, patients stop taking medications because they feel they are taking too many pills every day. In a recent study conducted in the US, 49% said they had forgotten to take a prescribed medicine; 29% had stopped taking a medicine before the supply ran out; and 24% had taken less than the recommended dosage. So it is better to take 1 pill than 3 pills.

    The Big Picture

    According to various market research companies, the US depression therapeutics market is roughly US$4bn in 2011 and is expected to grow at double digit reaching US$8bn by 2018. Even though there are 20 different molecules being sold by many companies, doctors are usually concerned about what they know and have experience with. For Forfivo, the name of the game to succeed in the US is to show patient benefit at an attractive pricing. While we estimate that ~80% of the market will be reimbursed with private insurance, we estimate the balance to be covered by Medicaid and Medicare with a small portion of paying patients. This implies a pricing strategy is of critical importance in this crowdie market. On a efficacy basis, comparative studies have demonstrated the equivalency of bupropion to Paxil (paroxetine), Lexapro, Zoloft and Prozac as antidepressants. Given its favorable efficacy and safety properties, bupropion still sells in large quantities: in 2011, total branded and generic sales totaled US$745m or about 3% of total prescriptions in volume. Bupropion has also lower side effects than most popular depression drugs. Forfivo is likely to be targeting the highest prescribers among the 45,000 psychiatrists in the US. Given that probably a portion of patients will likely require at least 450mg of buprorion, the primary market is slightly reduced. Don't expect lots of revenues in 2012 but rather 2013 where they will be finally profitable. I have seen recent market studies that also exemplifies demand by psychiatrists to use a higher dose drug when available. In the case of depression, a good portion of patients do require more than 450mg of Wellbutrin XL for an everyday treatment. In one study that I have seen, 98% of psychiatrists felt that there was a need for an higher dose because it increase compliance and 40% would recommend Wellbutrin XL because that is the drug they prefer to use for treating MDD.

    The Marketing partner

    Edgemont Pharmaceuticals, a private company, may be not a household name but with close to 200 reps and senior management with big Pharma experience will be targeting specialists treating depression. With a recent financing of $15m completed earlier in the year and growing revenues from their first product launched late last year, also a CNS product (high-dose fluoxetine or Prozac), we think this commercial strategy could be really effective.

    One Product Valuation Is Higher Than The Whole Company

    Just for Forfivo, we estimate the NPV at $58m, so how do I come up with this number. First let's look at the agreement. IntelGenx received a US$1m upfront payment +another US$4m for the launch + commercial milestones of up to $23.5m (if they achieve certain levels) + tiered double-digit royalties.

    What could be the peak sales be in three years:

    Already 1.5-2.0m patients on Bupropion

    X 15-25% on high doses

    X $600-900 yearly price range

    X 20-25% market share

    X18-22% royalty range

    = Median range for revenues of ~$70m and royalty revenues for IGXT of $15m.

    NPV= $58m using a 15% discount rate

    For a company with a market cap of $25m and lots of undiscovered value, it's worth looking at.

    Investment thesis

    I think the next $100m product that is expected to be launched in 2014 is the reformulated branded drug Maxalt (Merck) using the proprietary and unique IntelGenx' oral film. Convenience and rapid onset of action will certainly be attractive not only for current migraine patients using Maxalt but also patients on other triptans (Imitrex, Relpak, Zomig, etc...) which control the US$4bn worldwide market. The drug is already partnered with RedHill Biopharma, so the financial risk is very low.

    The Stock Price

    Low business risk, diversified portfolio and the company should be profitable one year after the launch of Forfivo XL.

    IGXT has also 9 other reformulated human drugs in development to hit the market between now and 2016. Compared to an approval rate of ~30% for New Chemical Entities (preclinical to market), reformulated drugs get approved in more than 90% of cases. All of the drugs are developed based with two clinical trials: pilot and pivotal bioavailability, which usually cost less than $1m each. Sorry I forgot to mention, maybe we should add the other animal drugs being developed for which investors have not pegged any value but I don't want to overwhelmed our readers. I would expect the stock price continue to improve given the positive technical trends.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: IGXT
    Oct 10 5:02 AM | Link | 8 Comments
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